A Comment -- General Comments From an Expert (A Commentary)

Gold does well when there are concerns about the maintenance of purchasing power of more conventional assets including bonds. For example ten year bonds are guaranteed 2% but purchasing power is down 6% so the interest rate is negative. The Russia/Ukraine conflict may be negative for gold in the near term since Russia may need to sell gold reserves to turn into cash due to banking restrictions and sanctions. However we are looking at a new era for gold since inflation causes money to lose its value. In the U.S. 35% of the dollars were put into circulation within a relatively short time. Deficits are here to stay.

Comment on Lithium. He prefers the larger producers. There is lots of lithium but there is a shortage of production capacity.

Technical analyst specializing in volatilty, Mark Sebastian, predicting the market future based on the VIX YTD the S&P has declined while the VIX has risen, touching a ceiling (like today) of 30. VIX vs. oil YTD: both have been moving in tandem, rising. Oil's spike is a major reason why the VIX has been climbing. Based on the VIX futures, Sebastian feels that volatility is now "swelling" and in "backwardation." The latter means the current VIX is above the next month's VIX futures, which signals the market is getting irrational--and nearing a bottom or another market breakdown. In other words, the market is stressed. Case study of the 1990 run-up to the 1991 Gulf War: the VIX topped out early on--August 23, 1990--but the S&P continued to fall until it bottomed on April 11, 1991--four months before the war ended. The VIX also spiked in late December 1990. On the eve of Desert Storm (by the US), the S&P started to take off while the VIX sank. Meaning: escalation between the West and Russia will see volatility and market weakness. In the Guld War, the market bottomed when we knew how the war would end (Desert Storm), and the same will happen with the Russian invasion. When the VIX and S&P diverge, that's the time to jump into the market. We're not there yet. There's more pain ahead.

Ukraine, rising interest rates and pandemic creating volatile markets. Best plan for investors is to focus on individual companies with good long term prospects. Double check your portfolio to ensure not exposed to problems in Ukraine.

Opportunities in small/mid-sized companies that have been overlooked the past few years. New asset classes such as Bitcoin with no tangible assets/earnings will be risky. Air being let out of market as low interest rates(free money) begins to reduce. Focus on value investments that operate in non-cyclical industries. Lots of speculative assets such as real estate positioned for a correction.

Markets. It's been a crazy 2022. Markets and investors are challenged this year with rising interest rates, inflation, and geopolitical tensions. Some of these concerns are somewhat misplaced. His research shows that equity markets generally do not become impaired unless inflation remains at 6%. US inflation is at 7% today, but he sees supply chain disruptions easing into the year, so inflation pressures will fall. Yields will continue to climb as the economy expands. Historically, rising interest rates on 10-year treasuries coincide with bullish equity markets. Escalating tensions between Russia-Ukraine have increased investor fear. Looking at similar past events, they fail to have any lasting impact on global economy and equity markets. In 2014, the S&P dropped 6% leading into the annexation of Crimea, but for that calendar year the S&P turned out a 14% return. It's emotional and scary, but take advantage of those fears and see what's ahead for the next 12-18 months. He doesn't see a recession around the corner. Equity bear markets are very unlikely.

How to ride out the storm in the near term? Cyclicals is where you want to be. Likes the energy sector. Capacity constraints have caused supply to remain static while demand keeps going higher. Oil and nat gas prices will continue to be strong. Also favours financials and industrials. Healthcare is a nice place with good, defensive growth.

Tech holdings in a portfolio. Tech sector has outperformed the S&P 500 for the last 8 years. Can this continue? He's not sure it can, as valuations are right up there. Sector is 6.5x price to sales, where we were in March 2000 when the tech sector dropped 82%. The market's shifted away from growth. Some of the beaten up names could be a trade on a bounce. A 60% tech weighting in your portfolio is a sign to trim.

Investing on geopolitical events. Don't buy something just because of what's happening in the world today, because those reasons may go away in short order. Same as you don't want to sell everything and go to cash today. You want to look for names that are good quality for the next 12-18 months. For example, maybe some travel names are down that you can take advantage of. He wouldn't buy defense contractors, consumer staples or gold today. Geopolitical events don't have a meaningful or lasting impact on the market. You want to take advantage of the fears in the market, but not invest in things that have responded quickly to geopolitical events.

Market concerns. Investors are nervous. Possibility that the Fed will increase rates as the economy slows. We've seen short-term rallies, but no follow-through. If you look back a year ago, we saw strong increases. It will be difficult to show Y/Y increases. If we see declines, plus moderation in inflation, the market might have to look through that and then start to recover. Expects choppiness through the next quarter. Then, it will depend on geopolitical events, economic numbers, and where rate increases are going.

Portfolio positioning. Opportunities in select sectors like energy, add on dips. Risk in price of oil due to geopolitical tensions, but even if the price does pull back, these oil companies are generating a lot of cashflow. Selectively in financials. Banks are expected to have slower growth, but will have higher earnings with higher rates. Consumer staples. Gold really starting to increase, and this should mean positive things for producers.

Seasonality of marijuana sales. Pandemic spiked sales. Numbers have come down as restrictions have been relaxed. January and February have the usual lulls after the holiday spending. Once the credit cards are paid off, people get back to spending again.